Two people of the exact same age will not pay the same amount in life insurance premiums because, aside from your age, a lot goes into the computation of a person’s insurability. The cost of life insurance is a measure of the risk that an insurance company is taking when they insure you. Underwriters assign a numeric value to different factors that helps them to calculate the probability of you dying. The higher the probability of you dying soon means higher premiums compared to someone that they have computed to possibly live years beyond you.
But you might say that you never can tell when and how a person would pass away. A completely healthy person can die earlier than a chronic smoker because of a car accident. While this is true, for most people factors such as your age, health, and occupation more often than not become the reason of one’s death.
Here are some of the things that insurance companies consider in calculating the total cost of your life insurance. Understanding each can give you an opportunity to make matters work in your favor so that you can get cheaper life insurance premiums.
Amount and period of coverage
A higher coverage or face amount means more expensive premiums. When taking out a term life insurance policy, you will find that the longer your coverage is, the more you need to pay for.
Age and Gender
Insurance companies encourage people to take out life insurance policies while they are still young because you will pay less compared to when you are already in your senior years. Of course when everything else is kept equal, younger people have less chances of dying compared to an older one, which means it is more likely the insurance company will not have to pay anything out on a term life policy.
Unfortunately, most people do not think about taking out life insurance until they are in their 40s or 50s. People in their 20s and 30s actually have more need for life insurance because it is at this period that a family is typically carrying more debt to pay and can ill afford for a breadwinner in the family to pass away.
Nevertheless, there are needs sometimes for people well into their older years to carry life insurance. Many people think that they can not get life insurance into their 70′s, but you can find senior life insurance options into your 70′s and beyond, just be prepared to pay more.
It is a proven fact that women have a longer life expectancy compared to men, hence, women will be charged less life insurance premiums compared to men.
Health and Weight
Being overweight can cause many serious health conditions that can shorten your lifespan. It can also be a symptom of a more serious underlying medical condition. Insurers place a higher premium on an applicant that is overweight compared to that who is close to not.
Your health condition as well as your medical history is probably one of things that insurers will first look at when pricing a life insurance policy. A person with a pre-existing medical condition or one who is not physically fit will be given higher premiums compared to one who just gets the sniffles every now and then.
People who drink, smoke, or take illegal substances are more at risk to develop medical conditions because of these habits and insurers take a higher risk when insuring their lives because of the increased likelihood of them dying. People who exercise and do not smoke or drink can expect to get lower premiums as their healthy lifestyle promotes good health.
There are some occupations that insurers consider more risky over others. A race car driver or a pilot presents more risk to his life because of his occupation compared to one who sits behind a desk all day. The more dangerous your occupation is, the higher the risk is, and this means more expensive premiums.